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Lending Club Cracks $70 Million, Prosper Has a Down Month

by Peter Renton on August 31, 2012

It was another great month for p2p lending with total loan volume for August coming in at $84.4 million. But it was two different stories from Lending Club and Prosper this month.

Lending Club Jumps Another $10 Million to $70 Million

After first crossing $50 million in new loans issued in June and then $60 million in July Lending Club kept up their impressive growth and hit another round number: $70 million in August.

The pattern that is playing out at Lending Club these days was exemplified in August. The month started out strong with over $30 million in loans in just the first week alone. Then it settled down to a $1 million to $2 million daily average for the rest of the month. The huge surge at the beginning on the month halved the number of loans on the platform and then it slowly built up again towards the end of the month.

The number of loans issued at Lending Club broke 5,000 for the first time. There were 5,419 loans issued in August with an average loan size of $12,932. This average has been maintaining around $13,000 now for the last several months. But what is staggering is the loan numbers themselves: it was just back in February when Lending Club issued 2,540 loans – they are now well over double that number in just six months.

This recent rapid growth is reflected in their 18-month chart below. The black line is the three month moving average.

Lending Club p2p loan volume through August 2012

Prosper Has Their First Down Month Since September 2010

It was a different story at Prosper this month. After 22 months of new loan growth Prosper’s impressive record came to an end this month. Their total for August was  $14.3 million down from $14.9 million in July. The number of loans was also down to 1,819 in August from 1,961 the previous month. The average loan size was a record, though, at $7,867 as the higher loan maximum for B and C grade borrowers took effect.

Unfortunately with Lendstats still down for Prosper investors I was not able to do any analysis to see the loan volume of large investors like Worth-blanket2 or Index_Plus this month. The Prosper numbers only look poor when compared to the stellar growth that is currently being shown by Lending Club. August was their second best month ever and was still up over 100% from August of last year. I expect they will be back to loan growth again next month.

But there is now a little hiccup on their 18-month growth chart.

Prosper.com 18-month new p2p loan chart

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{ 22 comments… read them below or add one }

Dennis August 31, 2012 at 6:05 pm

Personally, I would have put more money into Prosper in August if I could have found enough notes to invest in based on my investment style. The best notes get swallowed up in minutes after they’re posted. Unless you’re right there at posting time to catch one or two better quality notes, you’re almost out of luck in finding anything decent to invest in. The automated quick invest tool is too slow to catch these notes. In particular the “E” grade notes go very very fast. I think I caught 2 “E” grade notes total all last month. Either Prosper needs to attract more borrowers to offer more to investors or they need to level the playing field for small investors. One of the “E” notes I caught was invested in by heavenly-interest9 three different times within a minute and I caught $25 of it and another investor caught $50 of it, heavenly-interest9′s 3 quick investments caught $3,925 of the total on a $4,000 note. That represents 98% of the note to one large investor, gone almost the minute the note was posted. I got lucky on that one but I’m sure I lost out on countless others. I like the 24 hour 5% limit to any one investor policy someone else suggested in another post. Level the field Prosper or I’m done with you.

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Neal S. August 31, 2012 at 6:48 pm

@Dennis,

I share your concern about institutionals. It sounds like heavenly-interest9 is violating the spirit if not the letter of Propser’s 90% rule.

However, checking my accounts I was able to invest in 8 E loans in August. On one of them I’m investor #49 so it had to be out there for a while. Of course you and I may well have quite different selection criteria.

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Dennis August 31, 2012 at 7:43 pm

Yes there are a number (usually a very small number) of “E” grade notes that manage to get listed for a while, but those tend to have issues such as delinqeuncies or other things that make them less attrative. I, as I’m sure you do, have investment criteria and one of the the things I will not invest in are borrowers with delinqeuncies, past or present. You have to be very fast to catch the better “E” grade notes (no delinquencies) before the large investors quickly swallow them up. I’m having several issues with Prosper that is turning me off from investing there, this being one. I’m having better luck at LC and am looking to direct more of my investment dollars there. I still like Prosper, they just need to address some of these issues before I can get aggressive there again.

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Roy S September 1, 2012 at 8:57 pm

Looking at heavenly-interest9′s profile on Prosper, the label only shows Lender. I believe the 90% rule was instated for Institutional investors only. As such, I do not believe heavenly-interest9 is restricted to Prosper’s (unenforced?) 90% rule.

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Peter Renton September 1, 2012 at 7:42 am

Neal/Dennis, This is a problem that really needs to get solved at Prosper soon. LC have a 75% limit on all large investors and there are virtually no loans that disappear from the platform before 24 hours. Whereas at Prosper many, many loans disappear within minutes. My filters are providing less loans than they did 3 months ago and so I have had to adjust my strategy in order to keep putting new money to work.

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Henry Miller September 1, 2012 at 9:06 am

Major portions of loans disappearing like this within minutes have at least three distorting effects: 1. If the stated return on a loan class is, say 10%, but this is a mix of a 13% return on loans sold within minutes, and 7% on loans sold thereafter, then the stated return is misleading to all but the quickest and nimblest. 2. More critically, a p2p platform utilized primarily by very large or institutional investors is no longer peer-to-peer, but merely online lending. 3. Rapid funding results in lenders forfeiting a key advantage of p2p lending: the ability to ask questions and make prudent judgments based on borrower answers – fundamentals, logic, english usage. For example, I would lend to a bricklayer with poor english skills, but not to a programmer with poor logic and english skills.

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Dan B September 1, 2012 at 3:16 pm

Harry……….Your first assumption is a helluva big assumption considering that “very large or institutional investors” as you put it, have a rather uninspiring or mediocre history in terms of returns & therefore by extension, a mediocre history in picking the “best” notes. Your second statement is of course 100% correct………………but then no one’s been pushing the peer to peer aspect for some time now. In fact most references to the term can hardly be found on the websites anymore, if I’m not mistaken.

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Dan B September 1, 2012 at 3:16 pm

I meant Henry. Sorry about that.

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Charlie H September 1, 2012 at 8:45 pm

Peter did Prosper give you a heads up about having a no growth month when you visited them?

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Peter Renton September 3, 2012 at 10:28 am

Charlie, This topic never came up in conversation.

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Roy S September 1, 2012 at 9:16 pm

It doesn’t surprise me that Prosper looks like they may be plateauing while LC is continuing to grow. Prosper has become heavily reliant on a few large investors who fund significant portions of loans while crowding out the smaller lenders. I am also finding that fewer loans are meeting my criteria…an issue that doesn’t appear to be isolated to myself. In my opinion, Prosper needs to work on lender relations AND attracting more borrowers to their platform. I haven’t added new money in a few months mainly for reasons not related to Prosper, but they aren’t helping themselves either. Since I am not looking to add new funds at the moment, I can wait out for changes to both platforms, but Prosper isn’t looking to be profitable as soon as LC, and their loan volume is only a fraction of LC’s. If I were to put new money to work now, I would most likely be creating an account at LC and investing there. Hopefully they will implement a lot of changes between now and when I decide to add to my position.

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Investforfreedom September 2, 2012 at 11:04 am

I can’t confirm that, but I suspect that the Prosper hiccup has in part to do with Lendstats’s time-out. I noticed almost right away after Ken quit updating Proper’s data that some of the highest performing lenders had become less active: I don’t see their names show up as often as they used to in the loans. Obviously, many of the smartest lenders use Lendstats for making investment decisions. For the last couple of months, I have only been relying on my memory of past Lendstats statistical trends when picking Prosper loans, but I don’t know how much longer I can keep doing this. That’s one reason why I opened an LC account just last month. Perhaps, that also explains the recent surge in loans in LC.

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Dan B September 2, 2012 at 2:49 pm

Did you hear that Ken? It’s all your fault! The balance of fortunes between LC & Prosper & the volume of monthly originations all hang in the balance……………all because you stopped updating your Prosper data. It’s not because of the slow pace of new borrowers, its because the “smartest” investors have stopped investing………………& the institutionals (including the one that has committed $150 million to Prosper) couldn’t quite take up the slack :)

I’m sorry Ken, you know I appreciate your site……………..I’m just responding to one of the funniest posts I’ve read in weeks. Hope you’re enjoying your free time away from all silliness, including this one.

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Investforfreedom September 2, 2012 at 3:13 pm

Dan,

It may sound silly, but names such as 113121. icanhasloanz, golffish2, and of course Ken himself, lendstats_com hardly show up on Prosper any more. You can check for yourself. They are the top-ranking lenders by ROI. There are many others like myself who look over their shoulders. So if they are gone, it is not hard to understand that many will follow suit.

FYI, believe it or not, I have a 7-monitor computer set-up with each monitor displaying a loan grade ranging from A to HR from Lendstats when I pick the Prosper loans in real time.

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Dan B September 2, 2012 at 3:25 pm

Impressive! And how many millions were all of you guys combined putting into play each month? One million, two million, two-tenths of one million? Because the institutionals are doing many many millions each month & they would soak up any decrease from all of you combined quicker than it just took me to write this paragraph.
Understand that I’m not debating whether some individual investors have or haven’t cut back…………………..I’m saying that it isn’t making the difference.

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Investforfreedom September 2, 2012 at 4:08 pm

Dan, your guess is just as good as mine. Do you see lenders such as worthyblanket soaking up all the Prosper loans? I don’t. To be sure, they pick up some of the loans very quickly, often minutes after they are posted, but there are still plenty of loans left for individual investors. At any rate, I don’t mean to be a sticker on this one. To settle this issue, your will need some cold hard data comparing the contribution of institutions to that of individual investors. You are far too quick to dismiss my point.

Dan B September 2, 2012 at 4:33 pm

Investforfreedom………Actually I’m familiar with the “cold hard data” & it doesn’t support your point. The reality of the situation today as it has been for months now is quite clear. It’s hardly a state secret that the monthly origination numbers at Prosper are almost wholly determined by the volume of borrowers…………….because there is now & there has been more than ample amount of money on deposit &/or committed to fund 1.5 to twice the volume. In fact it could easily be argued that given that reality, Prosper has done a pretty decent job in resisting any impulse to loosen standards just to get more borrowers through the door.

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Investforfreedom September 2, 2012 at 4:58 pm

Dan,

What do you mean by “loosen[ing] standards just to get more borrowers through the door”? Unlike LC, there isn’t even an income requirement of $70k. Anybody with $25 can invest in it. That’s about as loose a standard as you could ever get.

But for the sake of argument, even by an extremely conservative estimate, you seem to be underestimating the power of individual investors. As of today, Prosper claims to have 1.46 million members. Suppose only 1% of these members, and if you don’t like it, I will grant you only 0.5%. This means 7000 of these members. Suppose they invest or reinvest $200 monthly using Lendstats data. You are talking about a volume of 1.4 million. And if they stop investing because of the lack of tracking data, this could have an impact.

You claim you are familiar with “cold hard facts.” Well, show me the money! Rather than talking in vague general terms.

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Dan B September 2, 2012 at 5:19 pm

Are these serious questions? I can’t help you if you don’t understand the difference between “borrowers” & “lenders”. What has the $25 minimum for INVESTORS have anything to do with what I said about “BORROWERS?

So let me just say this as plainly as I can. There are not enough borrowers. There are plenty of investors & investor money. Therefore if there were more borrowers, then there would be more volume, because there is no shortage of investors or investor money. That is as clear as I can make things. You got to stop staring at those 7 computer screens you got set up. They’re starting to mess with your ability to comprehend, I fear. :)

Also, why are you using 1% out of 1.46 million (as if that’s a reasonable number) when anyone that has done even a minimum amount of investigation knows that Prosper only has somewhere around 50,000 total investors?? Read the GAO report if you doubt that number to be a cold hard fact. Could it be that once again you’re not understanding the difference between investors & borrowers? So how does that intricate 1% calculation look now?

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Dan B September 2, 2012 at 5:22 pm

And if you’re going to quote me, quote me accurately. I said that “it could easily be argued that given the reality (that there is plenty of investors & investor money), Prosper has done a pretty decent job in resisting any impulse to loosen standards just to get more borrowers through the door.”

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Peter Renton September 3, 2012 at 10:33 am

Dan/InvestforFreedom, I think we can safely say that Lendstats closing down did not do anything positive for Prosper. I have heard from several large Prosper investors who relied on Lendstats who curtailed their investing and several others who were piggybacking on them. But even the largest of these dwarf in comparison to Worth-blanket2 and Index_Plus. Without access to the investor data, though, we can’t know exactly what the story is.

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Dan B September 3, 2012 at 1:55 pm

Peter…………..Your generic & simultaneous response to myself & Investforfeedom is very PC & very 50/50 in its attempt to find common ground. However I for one am not appreciating that because only one of us has any idea of what we’re talking about……………& only one of us can apparently manage basic math. Please don’t lump us together.

I think that we can safely say that the elimination of the ability to ask LC borrowers whatever questions one wanted did not do anything positive for Lending Club when it occurred in mid 2011 either. We both heard from dozens (not several) of investors stating unequivocally that they would never invest another dollar because of the changes. We both know a blogger who strongly voiced his opposition to the new policy & stopped investing there entirely. There were some very strong feelings in those days, if you recall, feelings that persist to this day.

So did all these investors & their investments added together do anything to derail Lending Club’s growth? I don’t recall where you stood on that question, but I came out & claimed loudly to all that would listen that not only would it not curtail growth, but it would also not affect returns one iota. How did that call work out? Obviously the growth continued & accelerated to where it’s now, some 300%+ higher than it was when all that went down in mid 2011. Why? Because there was plenty of investor money & new investors……………& once the number of borrowers accelerated up, then doubled so did volume.

This situation with Lendstats & Prosper is similar in that the effect will be minimal because there is plenty of existing investor money & it’ll all come down to getting more borrowers. The investors who were using Lendtstats may slow down or even step away, & the followers may step away, just like the investors from LC who relied on the personalized Q&A stepped away. At the end of the day volume will not be affected by their absence.

Some of these investors will not like hearing this but it is what it is. Successful investors come & go & adapt to changing conditions. In any case, sooner or later, if enough demand exists, someone will come around & offer the same service as Lendstats anyway. So………………..

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